Senate bill would exempt airlines from paying tax on fuel

On the day the N.C. House passed a bill that would give American Airlines a tax break, two senators went even further – they would exempt all airlines from paying the tax.

Sen. Joel Ford, a Charlotte Democrat, co-sponsored a bill with Republican Sen. Bill Rabon of Southport to exempt airlines from paying sales taxes on fuel.

They filed the bill Thursday, the same day the House passed a measure to extend by four years the $2.5 million annual cap on fuel sales taxes paid by American Airlines. The provision was part of a larger bill on economic incentives.

Supporters said the extension could be a key to keeping American’s hub in Charlotte. American merged with US Airways last year.

But Ford said the Senate bill offers American a better guarantee.

“They’d be happy with the cap … but it would be temporary,” Ford said. “This would remove ever having to come back and deal with this issue again. I don’t want Charlotte to become Pittsburgh.”

When US Airways dropped Pittsburgh as a hub several years ago, the city lost hundreds of daily flights, leaving much of the airport unused.

Ford said his bill would cost the state $23 million a year in lost revenues.

The Senate bill is similar to an earlier request from American and other airlines to lift the sales tax on fuel altogether. A spokeswoman for American referred questions to Airlines for America, a coalition of carriers.

The coalition has called fuel “by far the industry’s largest and most volatile cost,” accounting for more than a third of its operating expenses.

“(The coalition) continues to support a full exemption for commercial jet fuel from the general sales tax,” spokesman Vaughn Jennings said Friday, “as it is inherently unfair for consumers to effectively be taxed twice on airfare, and the business inputs such as fuel, that make up the fare.”

It’s unclear how the Senate bill will fare. Rabon co-chairs the Finance Committee, which would likely vote on the measure.

This story was originally published March 6, 2015 at 6:52 PM with the headline "Senate bill would exempt airlines from paying tax on fuel."